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BREAKFAST DEALS: Gunns remedy

Gunns looks to have secured support for a debt recapitalisation, while things heat up around James Packer.

Gunns Limited has been missing in action for a while, since the Richard Chandler misfire. However, a media report indicates that the timber company is winning support from institutional investors for a $400 million recapitalisation plan. Meanwhile, billionaire James Packer will have to keep his eye not just on Consolidated Media Holdings – his old love – but also Echo Entertainment – his new love. Elsewhere, Alesco is about to tell its shareholders to stay away from Dulux Group, Goodman Fielder is moving ahead with its asset sales with major shareholder Wilmar International sitting pretty, and NBN Co is looking for a second construction contractor.

Gunns Limited

Australia’s most famous timber company, Gunns Limited, could be ready to reload after two months of suspension from trading. Fairfax believes that Gunns has secured the support of crucial institutional shareholders to mount a $400 million recapitalisation to reduce debt, rekindle the value of its plantation arm and push forward with its infamous Bell Bay pulp mill in Tasmania.

Gunns has been idle on the register since March 9, following the disappointing withdrawal of New Zealand-born and Singapore-based billionaire Richard Chandler from a $150 million recapitalisation plan. Gunns owes more than $550 million with a market capitalisation of $150 million. That’s the main reason why its share price is at 16 cents a pop, but its net asset backing per share is listed as 88 cents.

James Packer, Consolidated Media Holdings, Telstra, Foxtel

Consolidated Media Holdings mightn’t relinquish its 25 per cent stake in Foxtel, but it may cede control of it to someone else. The company released a statement on Friday explaining that "it was not considering a sale of its Foxtel interest,” but is instead in "preliminary discussions concerning a possible control proposal”.

CMH didn’t specify whether "change of control” referred to itself or its Foxtel stake alone. If the gist of reports has been accurate, Packer is looking to sell out his majority stake in CMH, which could have a buyer control of that larger stake in Foxtel. UBS, Packer’s preferred investment bank, is continuing to advise CMH.

If we look further down the road, things get complicated. The theory goes that Packer is looking to raise some capital for a possible run at Echo Entertainment. Crown, which Packer owns almost 50 per cent of, has a 10 per cent stake in Echo; with Packer pushing for a board seat amid plans to build a Sydney casino tailored to attracting Asian high rollers. Packer has been pushing the NSW government to lift the 10 per cent limit on his holding and, according to The Australian, fund manager Perpetual is doing exactly the same. Would Perpetual support Packer’s push for an Echo board seat, or his plans for a Sydney casino?

Dulux Group, Alesco Corporation

Alesco Corporation looks set to tell its shareholders today to not take any action regarding the $188 million, $2-per share cash bid from Dulux Group. The Australian Financial Review says Alesco will release the letter to the Australian Stock Exchange sometime today, as it waits to receive Dulux’s bidder’s statement later this week.

The Dulux bid caught the target – and the market – by surprise. Snapping up 20 per cent of the company at $2 a share and urging the rest of the register to do likewise was a bold move, but it doesn’t appear to have sealed the deal. It looks like there are a lot of people sitting on the targets register that will demand a better offer. The share price has responded accordingly, with the stock trading at a four per cent premium to the offer price. No one would throw money down like that without a sporting chance that Dulux will put up some more cash.

Goodman Fielder

Australian breadmaker Goodman Fielder is reportedly moving closer to a sale of its edible oils and fats business and New Zealand milling assets. The Australian Financial Review says site visit schedules hit possible buyers on Friday, with five thought to be in the mix.

Singapore’s Wilmar International is thought to be one of those potential buyers. In February, Wilmar took a 10.1 per cent stake in Goodman with some expecting the company to go for a fully-fledged takeover. However, things have gone pretty quiet if control is what Wilmar is after. Others have suggested that Wilmar was simply getting prime position for the asset sales.

Goodman shares spiked when Wilmar picked up the stake and they’ve broadly held the ground. This took some of the heat out of rumours that the company was a takeover target for private equity. Given that not private equity suitor has emerged while the company is pushing ahead with an asset sale – value a private equity suitor would usually like to secure for itself – it looks like Wilmar is the only likely candidate for a full tilt.

NBN Co

NBN Co has reportedly started looking for its next major contracting deal for the national broadband betwork in NSW, Victoria and Queensland. According to The Australian, NBN Co is looking for expressions of interest from the nation’s leading construction companies, including Downer EDI, Transfield Services and Syntheo.

NBN Co already has an east coast constructor in Silcar, a joint venture between Siemens and Thiess Services, with a four-year $1.1 billion contract. The negotiations for this new agreement will undoubtedly be smoother than the last time. NBN Co suspended the tender process after receiving bids it believed were unnecessarily high.

The wash up from that revealed that construction companies were unwilling to take on the cost blowout risk in the wake of the big problems experienced at Leighton Holdings thanks to the desalination plant and the Brisbane toll road. As such, expect a few commentaries about the state of Australian industrial relations to be woven in to stories about the new NBN contracts.

Wrapping up

Iron ore billionaire Andrew "Twiggy” Forrest has thrown some cold water on the idea that he’s bullish on the gold price following his investment in Apex Minerals. Forrest claims he’s just trying to help out a company that’s a little short on capital.

Meanwhile, Spark Infrastructure is thought to have placed a competitive bid for the $2 billion Sydney desalination plant, along with Industry Funds Management and a consortium led by Hastings Funds Management, according to The Australian Financial Review. And finally, the same newspaper reports that RiverCity Motorways is expected to receive bids of around $500 million when it puts the Clem Jones Tunnel up for sale later this year.

Alexander Liddington-Cox

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